3.3 Types of Costs

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7 Terms

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Cost

Total expenditure a business needs in order to run its operations

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Fixed Cost

Doesn’t change regardless of production

E.g: Capital Equipment, furniture

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Variable Costs

Costs change according to level of production

E.g: Ingredients, materials

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Direct costs

Specifically related to a particular project/product in the business

E.g: Employees, goods sold in stores, store maintenance

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Indirect Costs

Costs that cannot be traced to any particular product

E.g: Head office, board member’s salaries

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Revenue

Measure of money made by sales

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Revenue streams

Means other than trading activity used to generate income